Fed minutes show "patience" may wear thin by end of year


While members of the Federal Open Market Committee voice a unanimous call for “patience” at the end of their March 20 meeting, details about the meeting released Wednesday showed some dissenting views.

“Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments,” according to the minutes.

Some members voiced concern about the housing market. At the end of last year, after mortgage rates climbed to the highest level in more than seven years, sales of existing homes dropped to a three-year low, according to data from the National Association of Realtors.

“Continued softness in the housing sector was a concern,” the minutes said.

However, data released by NAR two days after the Fed meeting showed the market rebounded after mortgage rates began dropping at the beginning of 2019. Existing-home sales in February saw the largest month-over-month gain since December 2015, the Realtors group said in a March 22 report.

The FOMC minutes showed some members fretted about housing affordability.

“Real residential investment appeared to be softening further in the first quarter, likely reflecting, in part, decreases in the affordability of housing arising from both the net increase in mortgage interest rates over the past year and ongoing house price appreciation,” the minutes said.

A hike in the FOMC’s benchmark rate might be appropriate later in 2019 if economic expansion continued above its longer-run trend rate, some members believed. After weaker-than-expected GDP growth in the first quarter, some members of the FOMC expected GDP to “bounce back solidly” in the second quarter, the minutes showed.

“A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” the minutes said. “Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.”

The central bankers hiked rates four times in 2018. Prior to the March meeting they had been indicating two more increases before the end of this year.

The Fed also announced at the end of its March meeting it would slow the monthly reduction of its holdings of Treasury bonds from up to $30 billion to up to $15 billion beginning in May, confirming its intent to end its balance sheet runoff in September, if the economy and market conditions go as expected.

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